BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          AB 1672 (Torres) - Housing-Related Parks Program
          
          Amended: June 19, 2012          Policy Vote: T&H 6-3
          Urgency: No                     Mandate: No
          Hearing Date: August 6, 2012                           
          Consultant: Mark McKenzie       
          
          This bill does not meet the criteria for referral to the 
          Suspense File. 

          
          Bill Summary: AB 1672 would revise the criteria that the 
          Department of Housing and Community Development (HCD) uses to 
          award grants of bond funds from the Housing-Related Parks 
          Program.

          Fiscal Impact: 
              Potential acceleration of bond sales, which could result in 
              increased debt service payments in the short term if demand 
              exceeds original expectations of expenditure (Housing 
              Urban-Suburban-and-Rural Parks Account - Proposition 1C bond 
              funds).

              Minor costs to HCD to revise program guidelines (Housing 
              Urban-Suburban-and-Rural Parks Account).

          Background: The Housing and Emergency Shelter Trust Fund Act of 
          2006 (Proposition 1C) authorizes the issuance of $2.85 billion 
          in general obligation bonds, including $200 for housing-related 
          parks grants in urban, suburban, and rural areas, which would be 
          available upon appropriation by the Legislature.

          Existing law, as enacted by AB 2494 (Caballero) Chap 641/2008, 
          established the Housing-Related Parks Program (HRPP) to provide 
          grants for the creation, development, or rehabilitation of park 
          and recreation facilities.  HCD administers the program and 
          awards grants to any city and county based on the number of 
          affordable housing starts for newly constructed units in a given 
          year, based on specified criteria.  Awards are calculated on a 
          per-bedroom basis and HCD has set the base award amount at $500 
          per bedroom for low-income unit and $750 per bedroom for a very 
          low-income unit, and awards bonus funds for extremely low-income 








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          units, infill projects, and to cities and counties that meet 
          other criteria.  If eligibility for funds exceeds the amount 
          available, HCD reduces all grants proportionately.

          The Legislature has only made a single appropriation of $25 
          million in HRPP funds to date.  Although it was originally 
          anticipated that HCD would make $25 million in awards each year, 
          demand has been very low because of both the slowdown in housing 
          construction and a decrease in funding available for affordable 
          housing development.  HCD only awarded $8.8 million for 2010 
          housing starts after issuing an initial Notice of Funding 
          Availability (NOFA) for $25 million.  After issuing a second 
          NOFA for 2011 housing starts, another $11.3 million was awarded. 
           The Legislature did not make an appropriation of new funds in 
          the 2012-13 Budget Act, and HCD indicates that the remaining 
          amount from the initial appropriation is insufficient to issue 
          another NOFA.

          Proposed Law: AB 1672 would revise the eligibility criteria for 
          the HRPP.  Specifically, this bill would:
                 Base awards on building permits, rather than housing 
               starts.
                 Expand eligibility to allow awards for both new housing 
               units and affordable housing units substantially 
               rehabilitated, acquired, or preserved with committed local 
               assistance.
                 Require a local jurisdiction's application to include 
               documentation on issuance of building permits for new 
               housing units or issuance of a certificate of occupancy for 
               acquired, rehabilitated, and preserved housing units, as 
               specified.
                 Repeal a prohibition on HCD disbursing funds prior to 
               receiving documentation of a city or county certificate of 
               occupancy or final inspection.
                 Require HCD to award "substantial" bonus funds for new 
               housing units, to jurisdictions that commit to funding new 
               park facilities or park improvements in a disadvantaged 
               community, and to jurisdictions that qualify as park 
               deficient. 
                 Require HCD to award additional bonus funds for units 
               affordable to extremely low-income persons, units in infill 
               projects, jurisdictions that have exceeded specified 
               housing production thresholds, jurisdictions that conforms 
               its general plan to a regional blueprint, and those 








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               demonstrating funds will be spent to support infill 
               development. 

          Staff Comments: This bill is intended to remove barriers to 
          awarding funds in the HRPP, expedite distribution of grant 
          funds, and increase incentives to jurisdictions to spend 
          allocations in park-deficient areas, infill developments, and 
          disadvantaged communities. 

          By basing awards on building permits rather than housing starts, 
          and expanding the program to include acquisition, 
          rehabilitation, and preservation of existing low-income housing, 
          AB 1672 will likely result in more successful applications and 
          potentially larger individual allocations.  As noted above, the 
          existing program criteria, combined with extenuating economic 
          conditions, have resulted in weak overall demand for the program 
          to date.  While the bill is expected to increase demand from 
          current levels, it is unlikely that the bill's changes to the 
          program will increase demand over the initial expectations of 
          $25 million per year.  To the extent that demand exceeds initial 
          expectations, however, AB 1672 could create pressure to fund the 
          program at a higher annual amount, resulting in an acceleration 
          of bond appropriations and corresponding debt service payments.  
          Any increase in bond appropriations would not likely occur until 
          at least several years after the program has experienced excess 
          in demand for funds over several cycles.